Why KeyW Holding Stock Just Dropped 15%

What happened

Shares of government IT contractor The KeyW Holding Corporation (NASDAQ: KEYW) are plummeting today, down 15.4% as of 12:50 p.m. EDT after the government intelligence, cyber, and counterterrorism specialist reported second-quarter earnings (actually, losses) that may have fallen short of expectations.

KeyW reported a $0.23 per-share loss for Q2 versus consensus estimates of a $0.22 loss. On the other hand, KeyW says its “adjusted” loss was only $0.05 per share. Sales, on the other hand, more clearly exceeded expectations, with KeyW reporting revenues of $128.1 million versus a Street estimate of $125.5 million.

Image source: Getty Images.

So what

Sales may have beaten estimates, but up barely 3% over last year’s Q2, KeyW isn’t exactly setting records for sales growth rates. Similarly ho-hum was the earnings result — better than last year’s $0.37 GAAP net loss to be sure, but still a loss.

The company also remains firmly in the red from a free-cash-flow perspective, with FCF actually worsening year over year. At the halfway mark, KeyW has now burnt through roughly $15.5 million over the past six months.

Now what

As for the rest of this year, KeyW says its guidance has not changed. Revenues are still expected to come in between $495 million and $515 million, management is still forecasting an 8.9% to 9.3% “adjusted EBITDA margin,” and KeyW still isn’t confident enough to give its shareholders any assurance that it can earn a GAAP profit this year.

No wonder investors are selling.

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Rich Smith has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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